Bài giảng Business Law - Chapter 36: Third-Party Relations of the Principal and the Agent

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin8The Agency RelationshipThird-Party Relations of the Principal and the AgentAgency LawPARTThird-Party Relations of the Principal and the AgentPAETRHC36We intend to conduct our business in a way that not only meets but exceeds the expectations of our customers, business partners, shareholders, and creditors, as well as the communities in which we operate and society at large.Akira Mori , President and CEOMori Trust Co., Ltd. (Japan)Learning ObjectivesKnow when an agent has authority to bind a principal to a contractUnderstand when an agent may be liable on contracts s/he makes for the principalRecognize when an agent’s conduct makes a principal liable for torts committed by the agentAn agent’s actual authority may be express (by words) or implied (by conduct)Apparent authority arises if communications by principal to third party creates reasonable appearance of authority in the agentSee Opp v. Wheaton Van Lines, Inc.: Plaintiff sued Wheaton for damages and the company alleged her ex-husband had actual or apparent authority to limit coverageActual v. Apparent Authority In ratification, a principal becomes obligated for an unauthorized act done by an agent or person posing as an agentAct in question usually is contract creationRatification relates back to contract creation and binds principal as if agent had authorityMay be express or impliedBasic contract law appliesRatificationAn agent’s liability for a contract depends on the nature of the principle: Agent who represents a disclosed principal is not liable on contracts made for the principalAgents are liable on contracts made for a partially disclosed principal unless parties agree otherwiseAn agent is liable to third parties on contracts made for an undisclosed principalContract Liability of Agent If agent contracts for a competent and existing principal but lacks authority, the principal is not boundThe result is unfair to a third party, so the agent is bound on the theory of an implied warranty of authority to contractSee In re Interbank Funding Corp. v. Chadmoore Wireless Group Inc.Implied Warranty of Authority A principal may be liable for a tort in four circumstances:Direct liability for tortsRespondeat superior Independent contractor activitiesMisrepresentationPrincipal’s Tort Liability A principal may incur direct liability for an agent’s torts because the principal is at fault and liability need not be imputedExample: sales agent merely applied the dealership’s deceptive sales policies Direct LiabilityThe doctrine of respondeat superior (let the master answer): a principal who is an employer is liable for torts committed by agents (1) who are employees and (2) who commit the tort while acting within the scope of their employmentPrincipal liable for employee’s negligent and intentional tortsA rule of imputed or vicarious liabilityRespondeat SuperiorGenerally an employee’s conduct is within the scope of employment if the conduct meets each of four tests:Conduct was of the kind that the employee was employed to performConduct occurred substantially within the authorized time periodConduct occurred substantially within the location authorized by the employerConduct was motivated at least in part by the purpose of serving the employerScope of EmploymentSince a principal does not control the work of an independent contractor, a principal is not liable for an independent contractor’s torts except: A principal may be directly liable for negligent retention of an independent contractor (e.g., hiring a dangerously incompetent independent contractor)Liability for Torts of Independent ContractorsA principal may be liable for agent’s false statements directly (intentionally or negligently) or vicariously (agent authorized to make true statements on the subject) Example: misrepresentation about the safety of medical devices by sales personnel Liability for MisrepresentationsAgents liable for their torts except when:Agent exercises a privilege of the principal (e.g., uses an easement)Agent takes privileged action to defend his person or principal’s propertyAgent makes a false statement in conduct of principal’s business but doesn’t know the falsity of the statementsThird parties are injured by defective tools or instrumentalities furnished by the principalTort Liability of AgentThought QuestionsDo you think the doctrine of respondeat superior is good policy? Why or why not?